Trends Watch: Risk Mitigation

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.   

This week, Elana talks with Devin Anderson, Co-Founder, Convexitas.  

What is your outlook for risk mitigation strategies? 

We view well-designed risk mitigation strategies as portfolio-enhancing tools that are always on, running in the background. These strategies should be limiting down-side risk for an acceptable cost while adding liquidity to a portfolio when it’s needed most. Creating opportunity for reinvestment/rebalancing and enhancing tax loss harvesting are the core roles risk mitigation should contribute to a portfolio. As such, the timing and opportunity for risk mitigation is less important than its design and ability to throw off useful, investible, and tax-efficient proceeds. In this sense, the outlook is always positive for adding risk mitigation so long as it’s designed and implemented well to achieve these goals. 

2025 has been particularly interesting for strategies like risk mitigation that are ‘good stress’ and perform well when markets are volatile. The new Trump administration so far has bred volatility by making policy fast, using tariffs as a negotiation tool, and sometimes quickly reversing policy actions. This sort of political news flow has injected enough intraday volatility into markets that risk mitigation strategies have performed well even in a rising market. To the extent this continues, we may be in an especially interesting time for these portfolio tools. 

Where do you see the greatest opportunities and why?  

Great options strategies must harness value in the options themselves. This value is usually created by forced or predictable trading, such as financial products that sell options to generate derivative income or insurance companies that have statutory risk limitations to be hedged. The growth of the derivative income product space continues to supply options and depress the price of volatility for some options, while insurance company hedging activity creates demand and increases the price of other options. It is our role as investment managers to take these dislocated prices and turn them into strategies that are useful to financial advisors and institutional investors. Sometimes those are protective, long volatility strategies for risk mitigation and other times those are risk taking or accelerated upside strategies. 

What are the greatest challenges you face and why? 

There are a lot of options-related products out there and educating financial advisors and investors is a hurdle. Helping potential investors navigate the landscape of related ETFs, private funds, and separately managed account (SMA) strategies is a bit daunting, especially when many have developed opinions about the efficacy of these strategies based on their knowledge of what we view as first-generation products. Some strategies are better delivered in SMAs while others as ETFs; helping allocators see these strategies not just as allocations, but true portfolio tools can be a lift. Educating investors on how to get the most out of risk mitigation strategies and the reinvestment opportunity they should create is challenging given the structural differences and performance of the existing marketplace, but we are up for the challenge.   

What keeps your clients up at night?  

Our clients look to us to provide actionable liquidity during drawdowns, minimize drag in up markets, and add tax efficiency to their portfolios. The most common problem we hear from taxable investors is that they are concerned about the amount of risk they are taking but reticent to reduce risk in a way that is tax inefficient, or trigger realized gains.  

Another common problem we hear about, specifically from financial advisors, is that they struggle to keep their clients invested against the natural tendency to sell into a lower market to reduce risk but increase positions during periods of market performance. Instead, our Tail Liquidity clients had the opportunity to stay invested during the early April 2025 tariff drama and redeploy the strategy proceeds prior to the April 9 recovery rally, directly monetizing the volatility to increase assets and long-term compounding of returns. 

A secondary problem we hear about is that while our clients love their tax loss harvesting strategies, they run out of efficacy at some point as the market gets too far away from their cost basis. Well-designed risk mitigation strategies can address all these issues. 

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.